Milton Freidman Was Partially Right

Milton Freidman Was Partially Right

Although Milton Freidman was a genius in the area of economics, I always thought him to be a buffoon when it came to his belief that: “the sole business of the managers of a publicly held corporation was to maximize the value of its outstanding shares. Any effort to use corporate resources for purely altruistic purposes he equated to socialism.”

Recently on the EBBF blog (European Bahá'í Business Forum), they had a post entitled: “Milton Freedman was right”. The blog post explored voluntary vs. regulatory CSR practices and referred back to Milt’s theories. I reacted by instinct and commented as follows:
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Unfortunately today you do need the encouragement of law to provide the minimal boundaries for CSR. View it as a Stimulus Package but it is not enough. The governments need to also put policies in place that provide incentives (carrot & stick). The two combined are like a petrie dish and nutrient. Nice package but again not enough.   The seed is really born out of capitalism nurtured in a free society. Out of this free society is born the ultimate in “people power”. People vote constantly with their wallets. Here in the United States, many businesses are waking up to the reality that consumers (Power has shifted from citizens) are choosing companies that are making a difference in the world. Of course they still want price and quality but all things being the same, many are choosing purpose driven organizations or purpose driven initiatives supported by companies. An excellent example is RED.   With modern transparency enablers (e.g. video cell phones, Youtube.com, bloggers like us…), consumers are savvy enough to identify authentic ones and are armed against the violators and those that use CSR as a marketing gimmick. If the conditions are right, the conversation of CSR will be a moot one in a few years as the balance switches from those that view CSR as a regulation and cost vs. those that are going beyond CSR and beyond the Triple Bottom Line.   The companies that have a huge head start are those that do not look to minimize their footprint on the environment but look to give back more than they take (e.g. Interface, Inc). They are also companies that do not look to meet gov’t mandated human resource requirements but exceed them (Patagonia, Inc), not just with generous yet sustainable benefit packages but also inspire the associates to go beyond (”it is not my job”). This inspiration is what is attracting consumers to become more conscious…one dollar at a time (Sorry Euros are good too:-)   Thank you for reading.
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Where I think Milton Friedman was partially right is when his comment is applied to Philanthropy. When it comes to Philanthropy frankly I have to agree with his quote stated at the beginning of this blog.

Where my comment was coming from is that CSR is beyond donating some money to a cause. It is about running business in a responsible manner, not only as a steward to the environment but also by treating others (employees, clients, vendors, shareholders & community) by the “Golden Rule”. That is all. Nothing complicated. We do not need a 15 year study and 3 volumes at 800 pages each to understand this concept. CSR in my book is pure and simple: Doing the Right thing.*

*Note: Actually it takes less than a page.

Sunday, January 7, 2007